Why the interest is not deducted from EBIT in operating cash flows. The investment is done by long term funds.
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Hello,
Earnings before interest and taxes measure the profit a company generates from its operations making it synonymous with operating profit. By ignoring taxes and interest expense, EBIT focuses solely on a company’s ability to generate earnings from operations, ignoring variables such as the tax burden and capital structure. EBIT is an especially useful metric because it helps to identify a company’s ability to generate enough earnings to be profitable, pay down debt, and fund ongoing operations.
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